Editorial: Here’s a good tip: Keep feds out of gratuities jar

Published 4:11 am, Tuesday, February 27, 2018

You’ve just finished lunch at a restaurant and add a little something extra for the server you put through the paces bringing you refills and clearing the vestiges of a great meal.

Will that added 20 percent make it into the server’s pocket?

Maybe not, under a proposal being considered by the U.S. Department of Labor.

At present, restaurants have some restrictions in how they can treat tips. Many follow the tip credit rules, which stipulate that tips are considered part of an employee’s wages. That means they can pay as low as $2.13 an hour so long as the tips make up the difference between what the restaurant pays and the minimum wage.

In 2011, a Fair Labor Standards Act rule specified that tips could be “pooled” — everyone pitches in and the tips are divided equally at the end of the day — so long as it was for jobs that would typically get tips. That has been interpreted to mean servers, bartenders or those who work “front of the house” positions.

This month, the Labor Department proposed allowing restaurant owners much more flexibility in how tips were divvied up. The owners could add back-of-house workers like cooks and dishwashers to the mix, for example.

Or the restaurant could keep the tips if paying minimum wage.

That’s not sitting well with the hundreds of thousands of people who rely on service-industry wages to make it from week to week.

During a 60-day comment period, about 374,000 comments were recorded. Many of them were negative.

Illinois Attorney General Lisa Madigan and the attorneys general of 16 other states have also chimed in with their opposition to the change.

Madigan says about half a million workers would be affected in Illinois and cites a study by the Economic Policy Institute that says that nationwide up to $5.8 billion in tips could be at risk.

The deepest impact in Illinois would be to women, according to the National Women’s Law Center. Its studies indicate more than 65 percent of tipped workers in the state are women — who are already disparate in earnings, making 84 cents for every dollar a male makes. The center says about 17 percent of women in Illinois who work largely for tips are in poverty.

The National Restaurant Association supports the change, if a provision is made that would prohibit restaurant owners from keeping tips for themselves. And while equity would be nice for all workers, the worry is that rescinding this rule would do little for the workers.

“As currently drafted, nothing in the rule would prevent employers from simply pocketing gratuities as additional profit. The results could be devastating for tipped employees and misleading to consumers,” Madigan and the attorneys general wrote.

In the end, don’t expect the Labor Department to be swayed. The Trump administration has heard the concerns and either disagrees or doesn’t care.